Ford Continues to Set Record Sales in China

Photo Credit: Ford Motor

Ford (NYSE: F  ) investors have a lot to be happy about after this year's run up of about 30%. That appears to just be the beginning of a long success story for a few different reasons. Momentum continues to build in the full-size truck segment which brings in more profit than any other segment for Ford and General Motors (NYSE: GM  ) . In addition to the truck segment, the entire industry is rebounding with June's SAAR nearing 16 million for the first time in over five years. If Ford's share price is to break through $20 it is going to need to drastically reverse losses in Europe or improve in China. The good news is that Ford is on track to do both.

Hidden success
The situation developing for Ford in China right now is a very interesting one, and it's almost a hidden success. When I say hidden success, I mean that if you look at the quarterly earnings reports you won't see much profit coming from China, if any. That won't be the case for long; by the end of the decade Ford expects China to represent as much as 40% of its revenues. As large capital investments in the region begin to slow, more of those revenues will carry to the bottom line – quickly driving Ford's earnings higher.

It will take time and a lot of money because doubling Ford's market share in China by 2015 is no easy task – yet Ford expects to accomplish this goal. In addition to the 15 new models it will launch in China by mid-decade, it also takes an understanding of the culture, which Ford is continuing to gain knowledge of. Ford's Kuga is a good example of this knowledge turning into success.

One of the reasons Ford set record numbers in China, which I'm about to show you, was because of the Kuga compact crossover. It is a tweaked version of the Escape that we see every day, because in China many people that can afford the vehicle are businessmen who employ drivers and need luxurious and more spacious back seats to do business with clients. Ford was able to squeeze out some extra leg room using a couple tricks, and also upgraded the materials to give a more premium feel.

The Kuga is a hit with consumers, it's helped lead to the impressive sales figures in China. With the first six months of 2013 in the record books, Ford's sales in China increased 47% to 407,721 in wholesale units. The month of June alone was up 44% compared to last year and both figures set records for Ford. 

Ford's passenger car joint venture, Changan Ford, also set records in the first half of the year, and is up 66% to 286,680 units. Despite a contracting commercial vehicle segment, Ford's Jiangling Motors Corporation investment managed to increase sales by 7% in the first half of the year to 110,230.

What's even better about the overall sales figures is that Ford is now competing in every segment of China's fast-growing SUV market with versions of the Kuga, EcoSport, Edge, and Explorer. With a better understanding of consumers in China, and with the introduction of 15 new models, it's clear that Ford's success will continue.

Bottom line
Consider that China's automotive market is already the world's largest and is still the world's fastest-growing. By 2020, many estimates have China's automotive market growing by the same size of Europe's market today -- an increase of roughly 12 million vehicles. That's an astonishing number, and with Chinese consumers more willing to buy imports because of perceived value, there are a lot of profits for automakers well positioned in the region – and Ford plans to be one of the big winners.

Winning market share in China will mean huge profits for investors, but which automakers are best positioned to win big? A recent Motley Fool report, "2 Automakers to Buy for a Surging Chinese Market", names two global giants poised to reap big gains that could drive big rewards for investors. You can read this report right now for free – just click here for instant access.

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Comments from our Foolish Readers

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  • Report this Comment On July 10, 2013, at 5:03 PM, NineD930thTA wrote:

    GMs sales may have had a lower percentage increase, but their sales increase in units was much bigger than Fords were.

    Ford is a dead dog in China. GM is king. Get off Fords teets already. 77,000 vehicles last month up 44% while GM sold over 240,000 units.

  • Report this Comment On July 10, 2013, at 5:26 PM, TMFTwoCoins wrote:

    There is no denying Ford is way late to the game in China -- way behind GM and Volkswagen. But Ford will come on strong, I'm quite sure they'll double their market share as they plan by 2015, but beyond that we shall see. One thing is for sure, Ford isn't a "dead dog".

    Quit being a GM homer, much to like about both companies as an investor.

  • Report this Comment On July 10, 2013, at 7:38 PM, glt6208 wrote:

    Doubling a pitiful market share sounds better than is. Since the Fool owns Ford shares it seems a good strategy to publish articles like this if your strategy is to "pump and dump".

  • Report this Comment On July 10, 2013, at 8:59 PM, GotTradinSkills wrote:

    If you think this one article could pump and dump a market cap the size of Ford you are an idiot.

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